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Richard Masa, Head of Section at the EU Delegation of Serbia

Trade Balance Brings Mutual Benefits

This special edition of CorD on Agribusiness comes at a timely moment when Serbia is preparing its position for negotiating the terms of its accession to the EU for chapter 13 (Fisheries) and is advancing work on meeting the requirements for opening also chapters 11 (Agriculture & Rural Development) and 12 (Food Safety, Veterinary and Phytosanitary Matters) for negotiation.

The agriculture sector is an important pillar of Serbia’s economy in terms of contribution to GDP (9%), employment (20%) and export (20%). Agriculture and the food processing industry trade between Serbia and the EU have more than doubled to > €2 billion per annum since the conclusion of the Stabilization and Association Agreement in 2008 – and more than quintupled since 2005 – helped by the initial non-reciprocal tariff-free access granted by the EU to Serbia.

Serbia has over the aforesaid period consistently maintained a positive trade balance in agrifood products trade with the EU. The EU has at the same time consolidated its position as Serbia’s largest trading partner in the sector.

Despite the challenges of climate change, Serbia enjoys largely favourable agro-climatic conditions and is a potent producer of cereals, oilseeds, top fruit and soft fruit to name only a few.

However, Serbia’s exports are still dominated by primary agricultural production with the share of value-added processed agricultural products only slowly increasing. Some of the tariff-free quotas in a trade with the EU such as those for baby beef and quality wine are not fully exploited.

There are also regional and structural imbalances as regards farm size distribution and efficiency. Land fragmentation and a still sizeable subsistence and semi-subsistence farming sector pose a challenge to the required sector reform. The country’s irrigation potential is underexploited. Insurance products needed to mitigate the risk of production need to be further developed to reflect Serbia’s exposure to natural disasters.

For Serbia to continue to harness its export potential and defend market share at home in a largely liberalized market it will, regardless of the EU accession agenda, need to further adapt to steadily evolving market requirements. This calls for the dependable supply of sufficient quantities of uniform quality – meeting statutory or the often required higher voluntary standards of food safety, sustainable agriculture and other criteria.

A rigorous quality policy is also a pre-requisite for an effective market intervention if and when required. For smaller producers to participate on the market, their organization in producer groups, cooperatives and other forms of the organization providing the benefit of collective production, processing and bargaining is the way to succeed. Finally, the strengthening of the capacity of all state services engaged in sector support and enforcement of applicable law is required.

As regards the accession agenda Serbia needs to be vigilant as regards changes in the EU agricultural (and food safety) policies. Whilst viable and safe food production guaranteeing a decent livelihood for our farmers and agribusinesses as well as balanced territorial development of our rural areas remain key objectives.

The EU has allocated €175 million to IPARD II to Serbia for the period 2014-2020. The expectation is that this amount may leverage up to €400 million in total investment – amongst others in modernization of farms, processing establishments and contribute to diversification of incomes of farming households and other rural businesses

However, other aspects come increasingly into play; for example in the current 2014-2020 budget cycle 30 % of CAP funding supporting farmers’ incomes is spent on environmental and resource-friendly production methods (” through so-called greening measures”) – and nearly 50% of the EU – budget for rural development programmes is earmarked for benefitting the environment or the fight against climate change.

The EU is assisting Serbia systematically in its sector reform efforts. This is done either by allocating funding from the IPA instrument to support the reforms by providing expertise from EU Member States, by providing with the most modern equipment to all levels of agribusiness administration or by introducing the IPARD instrument, the EU’s principal instrument for preparing the public and private agricultural sector stakeholders of an accession country for the requirements of the EU’s single market.

By this, the EU supports Serbia in its efforts to meet all relevant EU standards pertaining to agriculture, food safety and environment with the main motto is “learning by doing”. This has been proven as the most effective tool to prepare the country to absorb the very considerable increase in subsidies that will become available to the sector after accession.

However, this instrument needs to be embedded in an overall enabling policy framework that addresses also structural issues such as land fragmentation, access to rural finance specifically also for smaller and medium-sized operators, adequately trained and resourced advisory services etc.

The EU has allocated €175 million to IPARD II to Serbia for the period 2014-2020. The expectation is that this amount may leverage up to €400 million in total investment – amongst others in the modernization of farms, processing establishments and contribute to the diversification of incomes of farming households and other rural businesses. In the second wave of measures, these funds are also intended to support agri-environmental measures and local initiatives under the LEADER measure.